Sideways Mess With A Sprinkle Of Deflation

That’s basically how I’d sum up this year for the markets. Failed rallies and failed declines producing a sideways mess for most markets in 2014. And then starting in the fall of this year deflation took hold, commodities got slammed and the dollar soared. This also helped resume the trends higher in Utilities and Healthcare, which once again are leading the markets this year.

The problem now is what to do for the rest of the year and leading into 2015. As a contrarian I feel like the market is dangerous, there’s a lot of complacency with stocks at high valuations, and yet hardly anything is making new highs. Many growth stocks have stalled out and have messy charts with big gaps down. Without healthcare the market would probably be in serious trouble as there aren’t many sectors growing out there.

2014 could either be a consolidation year or a year that leads into a bear market. I think you have to keep an open mind and prepare for either scenario. I like precious metals down here as most producers can’t make a profit at these prices, which means these low prices aren’t sustainable unless we get more deflation. I don’t believe in deflation as a long term theme so I think accumulating when everyone is bearish is a good strategy, but you might have to wait a while for a new bull market.